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Target on advisers outside associations

Advisers who are not members of a professional association risk becoming disengaged or missing out on important information about the upcoming advice regulation overhaul, the Financial Services Council says.

Tuesday, November 7th 2017, 6:00AM 6 Comments

by Susan Edmunds

It is to run a summit this month with the Financial Markets Authority and the Ministry of Business, Innovation and Employment to help financial advisers navigate the coming change.

“This wave of regulatory change is designed to drive better outcomes for consumers.”, said Richard Klipin, chief executive of the Financial Services Council.

“It means though that big changes are coming for the sector that will impact on all."

The Financial Services Legislation Amendment Bill is expected to become law next year, beginning a period of transition that will run until 2021.

Klipin said the summit was designed particularly to capture advisers who were not part of a professional body that would advise them on what was required.

More are not members of an association than are.

There was the possibility that some were hanging back to wait until someone told them what they had to do, he said.

"There is a whole marketplace of advisers who are not members of the IFA or PAA but who do have agency agreements with members of the FSC. Those are the people we're trying to engage with the FMA and MBIE to bring them on a journey of change."

Klipin said some advisers were frustrated that much of the detail was yet to be determined, such as the code of conduct that will set out what competence and qualification standards are required. More detail is still yet to come on the disclosure requirements, too.

But he said there were "known unknowns" and areas where changes could be mapped out, even if the finer points could not yet be filled in. "Not everything is known but there is a lot that is. The more people we have engaged the better."

Klipin said it was important for the industry that it planned for change now, "rather than waiting until the starter gun goes off and a flood of people want to get through a narrow door".

“The FMA is very conscious that the level and rate of regulatory change can be challenging for the industry, but we hope that the expertise on offer at this summit will help all players come to grips with the new landscape," said John Botica, director of market engagement at the Financial Markets Authority and keynote speaker at the summit.

Tags: conduct Disclosure financial advisers Financial Services Legislation Amendment Bill FMA FSC IFA MoBIE PAA Professional Advisers Associations qualifications regulation

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Comments from our readers

On 7 November 2017 at 7:59 am Murray Weatherston said:
It's disappointing to read that Richard suggests that IFA and PAA are the only professional bodies in town.

[Normal SIFA disclosure applies for me.]
On 7 November 2017 at 10:05 am Brent Sheather said:
It is also ironic, given their long term track record, that certain professional bodies should pontificate on doing the right thing when doing the right thing is anathema to many of their members. My own view as to where professional bodies add value in the regulatory process is that they dot the i’s and cross the t’s so as to ensure that their members, when they don’t do the right thing by clients, don’t break any laws.
On 8 November 2017 at 5:25 pm Dirty Harry said:
Brent, as an AFA please remind yourself of Code Standard 2. An Authorised Financial Adviser must not do anything or make an omission that would or would be likely to bring the financial advisory industry into disrepute.

This Code Standard prohibits an AFA from conduct that would undermine public confidence in the professionalism or integrity of the financial advisory industry. However, this Code Standard does not prevent an AFA from commenting in good faith on the business, actions, or inactions of any person (including any other financial adviser, financial adviser group, financial service provider or industry body) or from exercising the AFA’s reporting powers under section 45A of the Act.

I submit that your repeated comments on this public platform regarding Professional Bodies, particularly the IFA and PAA go beyond ‘commenting in good faith’ on the actions or inaction of same, and your nonspecific allegations, do undermine the professionalism and integrity of the industry.

You are better than this, Brent. Your contributions and your insights are generally well received. You don’t need to lower yourself in this way.
On 9 November 2017 at 12:27 pm gavin austin adviser business compliance said:
Hi Dirty Harry
If you firmly believe that Brent has breached the code standard then you should consider using sec 45a of the FA Act and report the matter to the FMA. This may be the only effective way of preventing these rants fro said Mr Sheather.
On 9 November 2017 at 2:18 pm Brent Sheather said:
Hi DH

Thanks for your comments and thanks for the irony. If you didn’t notice the irony it is that you would remind me about Code Standard 2 when all I am doing is reminding the industry of the huge indiscretions and indecencies inflicted by certain IFA members on their clients not so very long ago. DH if you are truly concerned about issues “that would likely bring the financial industry into disrepute” you should be, like me, reminding members of past indiscretions in the hope that we avoid them in the future.

You also mentioned a lack of specifics in my last comment, about the bad behaviour. Gareth Morgan neatly summarises some of these issues in his book “After The Panic”. I am sure I can get a copy for you so let me know if you would like one. There are lots of examples here of IFA members, very senior ones, engaging in all sorts of bad practices. Indeed just this week two IFA members whom are CFP qualified set out in a newspaper article some ridiculous reasons as to why exchange traded funds were not a good idea. These included revelations like “passive funds will always underperform the index”, that investors should not concentrate on fees and that passive funds “have little or no chance of outperforming which can amount to several percent per year”. Where is the evidence for that last statement? I am sure the authors of the SPIVA report would find that conclusion amusing. The CFPs went on to say that ETF’s are often sold through brokers making “cold calls”. Really?

These high qualified CFP’s do CPD so presumably they know that institutional investors typically have a 50% weighting in passive funds yet they pursue this fantastic narrative.

I would love to think that financial advisors act professionally but everyday I’m confronted with evidence like this that they do not, hence my comments. Bad behaviour masquerading as best practice is not good for the industry and it is that sort of thing that brings the industry into disrepute.
On 10 November 2017 at 8:51 am Brent Sheather said:
Hi Gavin

We have all done things in the past we would rather not be reminded of but as some bright spark said once “if we ignore the mistakes of history we are doomed to repeat them”. I also appreciate your frustration given current business conditions and that you would rather still be working for your former employer. Good luck with the Section 45A idea.

Regards
Brent

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